The real problem after the Italian election: tell all those creditors to go screw

WELL, you can call it a problem if you like, personally I’d call it a godsend. But there are two things which should be making the European Union federast types very nervous right now. The first is that while neither of them actually won the election the winners in terms of doing really well were Berlusconi and Beppe Grillo. One’s a comedian and the other isn’t a billionaire on trial for under-aged whoring. But between the two of them this is true:

The projected results showed more than half of Italians had voted for the anti-euro platforms of Berlusconi and Grillo.

The second is that Italy really isn’t in the position of Greece (or Spain, Portugal, Ireland) in that the country does actually have the power to tell the EU to bugger off. And it’s that combination which is so dangerous (or wondrous, to taste).

A bit of economics geekery here. OK, so we all know they all owe vast amounts of money. And one way out of owing a vast amount is bankruptcy: with a country this would be default. Just don’t pay the people you owe money to. And here’s the geekery: if you’re running a primary deficit this doesn’t do you much good. You’re still taking in less in taxes than you’re spending on government. So, either you’ve got to hack away at spending (that “austerity” stuff) or, the day after you’ve just stiffed everyone you’ve got to ask to borrow some more money. This tends not to work so well.

Given that the EU will keep lending you money as long as you do the austerity bit, why bother to default then?

However, a primary suplus but an overall deficit is another thing. Here, you’re collecting enough in taxes to pay for current spending. But you’re not collecting enough to pay that and also pay all the interest on the old debt (nor repay the debt maturing). And at that point, it may well be telling everyone to go hang is a viable option. For you can still run the government without any extra austerity. After you’ve blown off all those foreigners looking for their interest.

More than half the country voted for the anti-euro people. And Italy runs a primary surplus. so it does in fact have the ability to tell all those creditors to go screw.

Which is very worrying: or, if you’re like me, just great. About time the euro broke up and Italy leaving would do it just fine.